Delta Air Lines

Delta tactics in Atlanta echo flap at Metro

Adv:

By
Nathan Hurst, The Detroit News |
Jan 23, 2009

Image via publicradio.org

Adv:

Just months after negotiating big cost cuts from Detroit Metropolitan Airport, Delta Air Lines Inc. is putting pressure on Atlanta's city-owned airfield to slice spending or risk losing flights to six other hubs in the airline's sprawling network, including Detroit.

The dispute mirrors a spat that played out last fall in Romulus between the Wayne County Airport Authority, which operates Detroit Metro, and Northwest Airlines, which Delta acquired in October.

The hardball Delta played with the Detroit and Atlanta airports illustrates the negotiating power the airline gained by acquiring Northwest and its three U.S. hubs to become the world's biggest airline.

"What Delta is making clear is that it can't sustain cost increases for the long term, and is willing to make changes to keep those in check," said industry expert Bill Swelbar, a research analyst at the Massachusetts Institute of Technology's Airline Data Project. "Airline hubs provide enormous value to the communities. But who should bear that cost?"

Metro Airport was Northwest's largest hub and is now Delta's second largest of seven. Airline officials here were quick to point that out when Northwest and Delta asked the airport authority to slice $10 million from its fiscal year 2009 budget.

The companies told airport officials that if they couldn't cut costs and raise revenue from parking and concessions to lower the airline's cost per passenger, the newly merged Delta could take its business to any of its six other domestic hubs -- Atlanta, Memphis, Cincinnati, New York, Minneapolis/St. Paul or Salt Lake City -- where doing business would be cheaper.

Now, Delta is telling leaders of Hartsfield-Jackson Atlanta International Airport -- the world's largest in terms of passenger traffic -- that unless costs are cut there, about two-thirds of the flights in and out of Georgia's largest city could be moved elsewhere. A letter sent last week to Atlanta Airport General Manager Ben DeCosta by John Boatright, Delta's vice president of corporate real estate, specifically named Detroit as one place those flights could be moved.

Experts caution such overtures are riddled with hyperbole given the City of Atlanta's desire to remain a leading global transit point. But such moves can also be effective.

In Detroit, at least a portion of the $7.3 million in cost savings and revenue increases obtained by Delta, Northwest and the other airlines operating at Metro was passed on to local passengers. Parking costs at the North Terminal's Big Blue Deck jumped from $10 a day to $16 in November, and daily prices at the McNamara Terminal's garage are expected to increase to $20 from $19, beginning Feb. 1.

Delta's 30-year lease at the Atlanta airport is up next year. While formal negotiations have yet to begin, officials at two other Delta hubs -- in Memphis and Cincinnati -- have indicated they are willing to take over any flights Delta might move from its home turf in Atlanta.

Here in Detroit, though, Metro Airport spokesman Michael Conway said the airport authority has focused its efforts on obtaining new service from all carriers instead of taking traffic from other Delta hubs.

"We market our service area to low-cost and network carriers all the time," Conway said. "But that's something we do on our own merit, not to take away from the other hubs."

Swelbar, the industry analyst, said he expects similar scenarios to play out at all of Delta's hubs as they negotiate contracts.

In the end, he said, it's a matter of communities choosing how valuable plentiful air service is in terms of supporting an airline with a low-cost hub structure.

"The big question," Swelbar said, "is who's willing to take on that responsibility."